Showing 41 - 50 of 89 entries
Research PaperSeparating True Innovation From Marketing Fads - From Journal of Indexes
Last year, 157 new ETFs and ETNs were launched in the United States - one-tenth of the total of 1,546, according to ETF.com. But how many of these new funds can be called real "innovations"? Take the hottest area of the market: what many investors call "smart beta", "strategic beta" or "factor investing". These are index strategies that take bets against the market in an attempt to either deliver risk-adjusted outperformance or to capture some...
Research PaperThe MSCI Multi-Asset Class Factor Model
Research PaperResearch Insight - Capturing Factor Premia - April 2014
Using the lens of the Barra US Equity Model (USE4S), this Research Insight provides a practical guide to constructing investable factor portfolios. This paper begins by discussing the general concept of a factor portfolio. We then explore the role of optimization in making a 'pure factor portfolio' investable. We assess how investability constraints impact the performance of factor-replicating portfolios. Finally, we discuss how MSCI Market Neutral Barra Factor Indexes can be used in an...
Research PaperResearch Spotlight - MSCI Factor Indexes in Perspective: Insights from 40 Years of Data - September 2014
With Research Spotlight - MSCI Factor Indexes in Perspective:Insights from 40 Years of Data, we launch our new publication called the Research Spotlight. IEach paper in the series, we will focus on the key findings of a longer white paper, summarizing the research for a non-technical audience. While certain readers will be drawn to the longer publication for the full scope of the study, the Research Spotlight affords a quick and focused summary for those interested in a concise...
Research PaperQuantitative Insight - Comparing GEM2 and GEM3: Portfolio Construction and Turnover
The methodological enhancements introduced in the new Barra Global Equity Model (GEM3) are designed to improve risk forecasts for optimized portfolios. In this paper, we investigate the turnover and forecasting accuracy of optimized portfolios generated using GEM3, and compare them with those generated using the model’s predecessor, GEM2. By testing various investment strategies during the period 2007-2011, we found no systematic difference in turnover; in fact, the GEM3 risk forecasts...
Research PaperIntroduction to Risk Modeling
Research PaperResearch Insight - Tracking the Earnings Yield Factor
Earnings yield - typically defined as the inverse of the price-to-earnings ratio - is viewed as a strong value signal. In this paper, we provide examples of portfolios that track the Earnings Yield factor return from the Barra US Equity Model (USE4). We examine different sets of constraints - including long-only, turnover and number of assets and leverage - to see how they affect the performance of tracking portfolios.
Research PaperStraight Talk on Nonlinearities in Linear Factor Models
Linear regression models have been the workhorses of finance and economics. However, given increasing attention to nonlinear methods, we investigate the extent to which nonlinearities not captured by standard linear models within equity factor risk models are present. Adding nonlinear factors in simple polynomial functions of their linear counterparts contributed some additional explanatory power to the cross-section of security returns. Furthermore, some generated factor returns and...
Research PaperThe MSCI Quality Mix Indexes
Factor-based investing has become a widely discussed topic of today's investment canon. In this paper - which is the last delivery of a four-paper series focusing on factor investing - we discuss the combinations of Factor Indexes taking as an example the MSCI Quality Mix Index.The MSCI Quality Mix Index is an equal weighted combination of the MSCI Quality, Value and Minimum Volatility Indexes. Academic research shows that quality, value and low volatility strategies have not only...
Research PaperBeyond Brinson: Establishing the Link Between Sector and Factor Models
Brinson sector-based attribution explains active return in terms of intuitive allocation and selection decisions. However, it cannot easily disentangle competing industry and style effects. We introduce a special type of factor model with five defining characteristics that exactly replicates the classic Brinson model. We show that this “Brinson-replicating” factor model easily extends to explain more general types of investment processes. In this extension,...